cci kpi report 2004

8/12/2019 Cci Kpi Report 2004

1/22Innovation Best Practice Productivity

An Introduction

to

Key Performance

Indicators

produced andwritten for CCI byDr. Will Swan andEmma Kyng
http://www.ccinw.com/


2/22nnovation Best Practice Productivity

Centre for Construction Innovation - November 2004

CONTENTS

Executive Summary ........................................................................................................................... 3

1. Introduction .................................................................................................................................. 42.1 Why do we need Benchmarking? ......................................................................................................................... 5

2. An Introduction to Benchmarking............................................................................................... 52.2 What is a Benchmark? ......................................................................................................................................... 5

2.3 What is Benchmarking? .......................................................................................................................................6

2.3 Common Benchmarking Pitfalls ........................................................................................................................... 7

3. Benchmarking in the Construction Industry.............................................................................. 83.1 Key Performance Indicators ................................................................................................................................. 8

3.2 Housing Quality Indicators (HQIs) ........................................................................................................................ 9

3.3 Design Quality Indicators ......................................................................................................................................9

3.4 Environmental Performance Indicators ............................................................................................................... 10

3.5 Respect for People Indicators.............................................................................................................................10

3.6 Benchmark Index ............................................................................................................................................... 10

3.7 Construction Clients Charter............................................................................................................................... 10

4. Key Performance Indicators ...................................................................................................... 114.1 What is a Key Performance Indicator? ............................................................................................................... 11

4.2 Why Use KPIs? .................................................................................................................................................. 11

4.3 What are the Headline KPIs? ............................................................................................................................. 11

4.4 How do I Measure a KPI? ...................................................................................................................................12

4.5 Using Radar Diagrams ....................................................................................................................................... 12

4.6 Conclusion..........................................................................................................................................................13

5. Introducing KPIs into your Business ....................................................................................... 14

5.1 Identifying Requirements ....................................................................................................................................14

5.2 Identify Stakeholders .......................................................................................................................................... 14

5.3 Identify Nominated Person ................................................................................................................................. 14

5.4 Select Which KPIs will be Required.................................................................................................................... 15

5.5 Some Issues with Headline KPIs ........................................................................................................................ 15

5.6 Other Benchmarks ............................................................................................................................................. 16

5.7 Internal Benchmarks .......................................................................................................................................... 165.8 Data Management .............................................................................................................................................. 16

5.9 Audit Systems..................................................................................................................................................... 17

5.10 Use of KPIs ...................................................................................................................................................... 17

5.11 System Review ................................................................................................................................................. 17

5.12 Clients and KPIs ............................................................................................................................................... 17

5.13 Benchmarking Clubs ........................................................................................................................................ 18

5.14 Conclusions ...................................................................................................................................................... 18

Appendix A - Useful Websites ......................................................................................................... 19

Appendix B - Glossary of Terms ..................................................................................................... 20Appendix C - Abreviations ............................................................................................................... 21



An Introduction to Key Performance Indicators

3

Executive Summary

Benchmarking is a tool that supports

business improvement. It is becoming

increasingly commonly used within theconstruction industry, specifically through

Key Performance Indicators. A benchmark

is a level of performance with which we can

compare ourselves.

Benchmarking asks who performs better,

why they are performing better and how a

company can improve. By comparing

ourselves to the best performers, or best

practice, we can see how to improve to

raise the level of performance.

Benchmarks may be internal, competitive or

generic. Internal benchmarks are when we

compare within our own company, such as

between projects. The data is easy to

collect, but the level of innovation may not

be high. Competitive benchmarks are when

we compare within our own industry. The

data is more difficult to collect, but

improvement will generally be greater.

Benchmarking Clubs are often a good placeto engage in competitive benchmarking.

Generic benchmarking is concerned with

comparing similar processes against those

in other industries. For example, supply

chain techniques from the automotive

industry may be transferable to construction

supply chains.

Benchmarking is an ongoing process of

continuous activity. The process must be

well planned and championed at a seniorlevel. It requires an analysis and

comparison of performance. Action must be

taken to drive improvement to close the

performance gap, and this action must be

reviewed. The process should not be

viewed as a one-off, there should be an

effort to drive continuous improvement in all

areas of the business.

Benchmarking is not easy. An

understanding of the common pitfalls isimportant in order to avoid the process

failing.

Benchmarking is central to the Rethinking

Construction Agenda. The targets for

improvement, or Key PerformanceIndicators (KPIs), form the basis for

continuous improvement. Key Performance

Indicators are national benchmarks that

allow companies to compare project and

organisational scores with the rest of the

industry.

There are a wide number of benchmarking

tools available to measure a variety of

different aspects of the construction

projects and organisations and allow themto be compared against national

benchmarks. These tools measure issues

such as people, design, environmental

performance and general business

performance. These benchmarks can then

be used to drive performance in this area.

While in principle, KPIs are a relatively

simple exercise, their implementation

requires consideration of a wide number of

issues. The key issue is to ensure goodcommunication with all relevant

stakeholders, particularly those who will

have to collect the data. KPIs are not just

about collecting data and any system will

use the data to drive good communications

with project team members and clients.

KPIs need to be used to drive action

otherwise the system becomes seen as a

data collection exercise.




1. Introduction

This report has been developed to provide

practical guidance for construction companies

and their clients on the different types ofbenchmarking that are currently being

undertaken in the construction industry. It draws

on a number of information sources (Appendix A)

available to industry, as well as the authors own

experience of developing and implementing

benchmarking systems.

The main areas covered in the report are as

follows: -

An Introduction to Benchmarking thissection discusses the main principles of

benchmarking, the different types of

benchmarking that may be carried out and

the main steps that have to be undertaken

in order to benchmark successfully.

Benchmarking in Construction this

section is concerned with the main

benchmarking activities in the construction

industry. This looks at a number of tools for

benchmarking the performance of products,companies, and relationships.

Key Performance Indicators this section

discusses how to use KPIs to benchmark. It

serves as a basic introduction to the main

concepts of measuring and using

comparative data to indicate relative

performance.

Introducing Key Performance Indicators

into your Business this section providespractical guidance in the implementation of

a KPI system within your business.




5

Benchmarking is a method of improving

performance in a systematic and logical way by

measuring and comparing your performanceagainst others, and then using lessons learned

from the best to make targeted improvements.

It involves answering the questions: -

Who performs better?

Why are they better?

What actions do we need to take in order

to improve our performance?

Essentially, it is about looking at the way things

are done and seeing why the performance is at a

certain level, and using external comparators to

improve performance. It uses data as evidence

to identify who is performing better and using

that understanding to drive improvement.

A recent surge of interest in Benchmarking has

been encouraged by the publication of sets of

national Key Performance Indicators. Beginning

in 1999, these benchmarks allow companies tomeasure their performance simply and to set

targets based on national performance data.

2.1 Why do we need

Benchmarking?

Benchmarking is not just about measuring your

own performance. It is about comparing with

others to drive improvement. Perhaps the best

known examples of Benchmarking within the

Construction Industry are the Key Performance

Indicators (see Section 4). These measures

allow construction companies to compare the

performance of their projects and organisations

against national benchmarks. By doing this they

can then look to the practices of the best

projects, such as Movement for Innovation

Demonstration Projects (see Appendix A), or the

Construction Best Practice Programme

(Appendix A), to drive improvement within theirown companies.

2. An Introduction to Benchmarking

Benchmarking allows you to see how your

organisation is performing in a specific area,

realistically compare it, and find ways ofimproving. This can affect all areas of the

business from profitability, to staff satisfaction

and retention.

2.2 What is a Benchmark?

A benchmark is a standard of excellence or

achievement used to compare and measure

against. It represents a best in class

performance for a specific process that can beused to compare against in an effort to drive

improvement. Some other definitions could be,

A benchmarkis a reference or

measurement standard used for

comparison (www.dti.gov.uk)

A benchmarkis the best in class

performance achieved for a specific

business process or activity. It is

performance that has been achieved andcan be used to establish improvement

goals.

When comparing between processes, there are

3 main types of benchmark to compare against,

Internal an internal benchmark is

concerned with comparing against the best

within your own organisation, such as the

performance between different construction

projects for example. The data is easy to

collect and practices more easily

transferred, however it is unlikely to be a

spur for large scale innovation.

Competitive a competitive benchmark is

comparing processes between

organisations within the same industry. This

will be directly relevant to your processes,

and could provide large levels of innovation.

However, it is often difficult to collect

comparative benchmarks unless you are a

member of a Benchmarking Club (see

Section 5.12). An example of a competitive

benchmark may be Health and Safety

records.
http://www.dti.gov.uk/http://www.dti.gov.uk/




Generic a generic benchmark is

concerned with comparing the same or

similar process, but within a different

industry. This may lead to high levels of

innovation, but there may be difficulties in

adapting practices from radically different

industries. An example of a generic

benchmark might be a comparison betweenconstruction and aerospace supply chain

management techniques.

The table right (Table 1) shows the

advantages and disadvantages of

different benchmark types. This

relates to how directly relevant the

benchmark is to your business, how

easy it is to get the data for

comparison, and what level ofinnovation might be expected.

2.3 What is Benchmarking?

Benchmarking is the process of comparing a

companys performance against a benchmark to

assess current performance and generate a plan

to drive improvement in order to drive

performance towards the benchmark level.

Benchmark Relevance Ease of Data Likely

Method Collection Innovation

Internal X X

Competitor X X

Generic X X

PLAN

COLLECT

DATA

ACT

REVIEW

REPEAT

Table 1 Different Benchmark Comparators

Plan:

Establish benchmarking roles and

responsibilities.

Identify the process/service/project to

benchmark.

Determine the data collection methodology to

be used.

Analyse:

Record performance levels.

Find benchmarking partners. Is there a performance gap and if so, identify

the reasons for the difference.

Act:

Set performance targets, then develop and

implement. improvement plans to meet them.

Review:

Monitor performance against the performance

targets.

Repeat:

Repeat the whole process benchmarkingneeds to become a integral part of your

business if you want to continue improving your

business.




7

2.3 Common Benchmarking

Pitfalls

Below is a list of common problems that people

come across when benchmarking. These should

be considered before undertaking any

benchmarking activity. Dont try and benchmark too many things to

begin with. Select two or three key areas,

and then gradually add others over time.

Dont waste time benchmarking things that

are just nice to know. Every benchmark

should aim to improve performance in an

area that is critical to the organisations

performance.

Dont select benchmarks that are notspecific or difficult to measure.

Try to carry out a pilot study to make sure

you understand the process.

Dont give up too early.

Dont keep the same benchmarks if the

companys priorities change.




In recent years there has been a huge amount of

benchmarking activity within the construction

industry. Clients, consultants, contractors andsuppliers are finding that there are an increasing

number of business drivers pushing them

towards benchmarking.

In this section we will look at the different ways in

which benchmarking is used and common

measures that are available. These different

measures fall into one of several categories

depending on what they are designed to

measure: -

Building Performance e.g. environmental

performance, design quality.

Project Performance e.g. time, cost,

defects.

Organisational Performance e.g. Health

and Safety, Respect for People.

Relationship Quality e.g. customer

satisfaction service.

3.1 Key Performance

Indicators

A Key Performance Indicator (KPI) is the

measure of performance that is critical to the

success of an organisation. The construction

industry KPIs allow the benchmarking of your

organisation against industry standard data

published by the Construction Best Practice

3. Benchmarking in the Construction Industry

Programme. The construction industry KPIs were

first published in 1999, and are updated annually.

The Headline Key Performance Indicators are

derived from the 5-4-7 model first put forward in

the Egan Report (1998) Rethinking

Construction. These improvement targets

formed the basis for the national Headline KPIs,

which were designed to show how improvement

would be demonstrated.

There has been a review of this model to include

issues such as sustainability and Respect for

People, as part of the improvement process, aswell as directly linking to the Headline KPIs (see

Section 4).

These KPIs are now widely used within industry

to measure performance and drive improvement.

They often form part of the requirement for

tendering for some projects. KPIs are explained

in more detail in Section 4.

Figure 1 5-6-10 Model (Rethinking Construction 2003)




9

3.2 Housing Quality Indicators

(HQIs)

Housing Quality Indicators (HQIs) have been

developed to allow housing projects to be

assessed on issues other than cost. Examples of

these quality indicators are highlighted in thetable below: -

Table 2 Housing Quality Indicator Issues

The use of HQIs is especially important for

Registered Social Landlords (RSLs) who are

required to send data regarding projects to a

dedicated national database www.hqiuk.com

managed on behalf of the corporation by the

Building Research Establishment (BRE)

Construction Benchmarking Centre. This allows

HQIs to be completed online.

Registered Social Landlords (RSLs) and other

Developers use HQIs to manage the quality ofdifferent housing schemes. It allows schemes to

be compared on quality, rather then a purely cost

basis. The HQI process enables the comparison

of schemes and allows development teams to

learn from their successes and mistakes.

3.3 Design Quality Indicators

The Design Quality Indicator is an assessment

tool to evaluate the design quality of buildings.The development of the DQI has been led by the

Construction Industry Council, with sponsorship

from the Department of Trade and Industry (DTI),

1. Location

2. Site - visual impact, layout and

landscaping

3. Site - open space

4. Site - routes and movement

5. Unit size

6. Unit - layout

7. Unit - noise, light and services

8. Unit accessibility

9. Unit - energy, green and sustainability

issues

10. Performance in use

the Commission for Architecture and the Built

Environment (CABE) and Rethinking

Construction. It has been developed to allow

consideration of design issues to be assessed.

DQIs look at design issues such as building

appearance, use or security to allow a greater

input into the understanding of how designaffects the end user. It is designed to be used in

conjunction with the industry KPIs. The DQI

assessment uses a number of different

categories to assess aspects of the design, for

example,

Build Quality relates to the engineering

performance of a building, which includes

structural stability and the integration and

robustness of the systems, finishes and fittings.

Functionality is concerned with the

arrangement, quality and inter-relationship of

space, and the way in which the building is

designed to be useful.

Impact refers to the buildings ability to create a

sense of place, and to have a positive effect on

the local community and environment. It also

encompasses the wider effect the design may

have on the arts of building and architecture.

It provides a framework to allow design to be

discussed. Client representatives and end-users

have an opportunity to address design issues in

a structured way. This will support the

development of the brief and the setting of

benchmarks. The additional transparency of the

design process makes choices more inclusive

and better understood by more members of the

development team.

The use of DQIs can support the development of

the brief, focussing solely on design issues and

allowing an objective comparison of different

design briefs against specified criteria.

When a building is completed and occupied, the

DQI can be used with a wider number of

stakeholders to assess the impact of the final

building. End-users, facilities managers and even

passers-by can be questioned with regards to the

design quality of the building. This informationcan be used to inform future developments.

www.dqi.org.uk.
http://www.hqiuk.com/http://www.dqi.org.uk/http://www.dqi.org.uk/http://www.hqiuk.com/




0

3.4 Environmental

Performance Indicators

Environmental Performance Indicators, produced

by the Movement for Innovation are designed to

look at the environmental footprint of a building,

in terms of energy use, water use, impact on thelocal environment and transport issues.

(http://www.m4i.org.uk/rc/publications/reports/

m4i_epi_report2001.pdf)

BREEAM (Building Research Establishment

Environmental Assessment Method) is an

environmental assessment method and quality

standard used to assess and review the

environmental performance of buildings. The

model is widely used, providing more detail thanthe Movement for Innovation EPIs.

(www.bre.co.uk/bream)

3.5 Respect for People

Indicators

The Respect for People Indicators have been

developed by Rethinking Construction to assess

the commitment that an organisation has to itspersonnel. These measures address issues

identified below: -

Workplace Diversity;

Site Facilities and the site working

environment;

Health;

Safety;

Career development and lifelong learning;

The off-site working environment;

Behavioural issues.

The Respect for People KPIs are seen as a

driver for good project performance. The

Commitment to People is seen as a key driver in

the 5-6-10 model (see fig 1) for the success of

construction projects, while good Respect for

People processes are central to organisational

improvement. The Respect for People Toolkithas a cross-over with tools such as Investors in

People, Benchmark Index, ISO 9000-2000 and

Considerate Constructors.

http://www.rethinkingconstruction.org/rc/respect/

3.6 Benchmark Index

The Benchmark Index is a tool designedspecifically for SMEs. The tool takes the form of

a detailed questionnaire addressing a variety of

areas based around both financial and non-

financial measures. This data gives a detailed

view of the business and allows the company to

be benchmarked against a national sample of

8000+ companies, with over 3000 from various

construction sectors. The on-line database

allows you to select companies that most closely

resemble your own to find a pool of companiesagainst which to compare against.

The Benchmark Index is supported by the

Department of Trade and Industry. Sample

questionnaires are available at:-

http://www.benchmarkindex.com/sb-fs.html.

3.7 Construction Clients

CharterThe Construction Clients Charter is a

benchmarking tool that is designed to support

clients in their procurement. The client has a key

role to play in construction project teams. The

charter highlights key areas of improvement for

large repeat clients to ensure they are committed

to improving their internal processes to support

procurement.

The Charter identifies a number of issues basedaround issues highlighted in Rethinking

Construction, such as partnering, culture change,

risk management. The Charter applicant

identifies how their organisation is introducing

new processes to support these aspects of

procurement and organisational development.

http://www.clientsuccess.org.uk
http://www.m4i.org.uk/rc/publications/reports/%20m4i_epi_report2001.pdfhttp://www.m4i.org.uk/rc/publications/reports/%20m4i_epi_report2001.pdfhttp://www.bre.co.uk/breamhttp://www.rethinkingconstruction.org/rc/respect/http://www.benchmarkindex.com/sb-fs.htmhttp://www.clientsuccess.org.uk/http://www.clientsuccess.org.uk/http://www.benchmarkindex.com/sb-fs.htmhttp://www.rethinkingconstruction.org/rc/respect/http://www.bre.co.uk/breamhttp://www.m4i.org.uk/rc/publications/reports/%20m4i_epi_report2001.pdfhttp://www.m4i.org.uk/rc/publications/reports/%20m4i_epi_report2001.pdf




11

Key Performance Indicators are probably the

most common benchmarking experience that

construction companies and their clients willhave encountered. Many companies are involved

with implementing KPI systems, sometimes

without understanding their place within the

Rethinking Construction Agenda. The following

section highlights some of the main issues and

gives an example to show how KPIs are

calculated.

4.1 What is a Key Performance

Indicator?

A Key Performance Indicator (KPI) is the

measure of a process that is critical to the

success of an organisation. Many organisations

use KPIs. There are a number of performance

measures that define the success of a project or

organisation.

The construction industry KPIs allow

the benchmarking of your organisationagainst industry standard data

published by the Construction Best

Practice Programme. The construction

industry KPIs were first published in

1999, and are updated annually.

4.2 Why Use KPIs?

KPIs have been seen as an integral

part of the Rethinking ConstructionAgenda. The 5-6-10 model (see fig 1)

identifies 3 key elements,

Drivers those things that have to

be in place to drive improvement.

Processes the areas of process

improvement.

Performance Targets the key

performance indicators.

The KPIs are essentially the evidence

that culture change and process

improvement are actually leading to

positive change in terms of better performing

4. Key Performance Indicators

projects and organisations.

Many clients, especially within the public sectorare seeking to work with companies that

demonstrate a commitment to continuous

improvement. Often the implementations of

robust KPI systems are seen as a requirement

for companies to win work. From the client

perspective, KPIs provide a useful way to

demonstrate wider project requirements, beyond

time and cost issues.

4.3 What are the HeadlineKPIs?

The headline KPIs are those defined by

Rethinking Construction in the 5-6-10 model (see

Figure 1). The KPIs are represented by the 10,

meaning there are 10 Headline KPIs. The

Headline KPIs are shown in table 2 below: -

Table 2 Headline KPIs

Name Description Type What

Measured?

Construction Cost Improvement of capital

cost year on year. Project

Construction Time Improvement of time

year on year. Project

Predictability Cost Actual cost against the

cost predicted at tender. Project

Predictability Time Actual time against the

time predicted at tender. Project

Client Satisfaction Client satisfaction withProduct the delivered product Project

Client Satisfaction Client satisfaction with

Service the service provided by

the Project Team Project

Defects Impact of the defects

of the final product Project

Productivity Value added per person

working on the project Project

Profitability Profitability of the

Construction Company Organisational

Safety Accident Incident Rate

for the Company Organisational




2

These Headline KPIs are generally concerned

with the performance of contractors. However,

there are KPIs for a number of different

members of the supply chain, such as

consultants, mechanical and electrical

contractors and product suppliers. A

comprehensive list may be found at KPIZone.

4.4 How do I Measure a KPI?

The actual process of calculating a KPI is

relatively simple, although there are some

practical issues that may need to be addressed

in implementing a system. These are addressed

in Section 5, Introducing Key Performance

Indicators into your Business. This section

highlights the basic principles of KPIs. The full

KPI measurement pack, containingmeasurement advice and comparison charts is

available from the Construction Best Practice

Programme www.cbpp.org.uk.Additional

information may be found at www.kpizone.com.

4.4.1 Calculating the Indicator

The first stage is the calculation of the indicator.

The indicator is the score that will be needed to

compare against other projects. For the examplewe will consider the KPI Predictability of

Construction Cost. This has two pieces of data

that need to be collected: -

a. Predicted Cost at Tender Stage

= 1,000,000

b. Actual Cost at Practical Completion

= 1,020,000

Using the KPI pack, we can see the equation for

Predictability of Construction Cost is: -

This gives us a score of +2%, which means that

the project was delivered 2% later than originally

predicted. This gives us our indicator. If this

score is negative then it would mean that the

project was delivered before the stated time in

the tender.

4.4.2 Calculating the Benchmark

The benchmark is a measure of how the

x 100Actual Cost - Predicted Cost

Prodicted Cost

indicator compares against an industry sample.

In the graph below (fig. 2) we can see two

curves. The dark line indicates the predictability

of cost of design; the lighter line indicates the

predictability of the cost of construction, the KPI

we are currently measuring.

Fig 2 Predictability of Construction Cost Comparison

Graph

The benchmark is calculated by: -

Finding the performance level of the

indicator, in our case +2%.

Measure horizontally across until you meet

the comparator line.

Measure vertically down until you find the

benchmark score, 34%.

The score of 34% is the benchmark. This shows

that, in terms of predictability of cost, this project

has performed better than 34% of the sample.

However, this also means that 66% of the

sample are performing better, showing a certain

amount of room for improvement.

4.5 Using Radar Diagrams

Radar diagrams are the most common way in

which people present benchmark information.

The radar diagram below shows different scores

for the headline KPIs for a particular project. The

score shown is the benchmark, a score out of

100% which shows how well a project is
http://www.cbpp.org.uk/http://www.kpizone.com/http://www.kpizone.com/http://www.cbpp.org.uk/




13

performing against the sample. For example (see

fig 3, below), if we look at predictability of cost we

can see the radar line touches 60%. This means

that the project is performing better than 60% of

the sample projects.

Figure 3 Example Radar Diagram

4.6 Conclusion

The actual calculating of the KPIs is a relatively

easy task. However, there are several issues thatneed to be considered when putting a system in

place. Issues such as getting staff involved,

storing the data and building the process into the

project can make the process difficult. These

issues are considered in the Section 5,

Introducing KPIs into your Business.




Although KPIs themselves are relatively simple,

the implementation of a workable system can be

a difficult task. The following section includessome advice based on the Centre for

Construction Innovation experience in putting

systems in place. Following this advice could

help prevent many of the common pitfalls in the

implementation of a KPI system. Clients may

have different requirements from contractors and

therefore your approach may be slightly different.

This process is from the perspective of the

contractor or consultant, who may want to put in

place a system to measure the performance of

projects.

Figure 4 KPI System Process

5. Introducing KPIs into your Business

5.1 Identifying Requirements

Why are KPIs being introduced into thecompany? It is important to understand what the

drivers are for putting a system in place, as

ultimately any system must meet the

requirements. Whether a KPI system is in place

as a requirement for winning work, a drive for

continuous improvement or both, it is important

to understand what the system is for and how

this will impact the system design as a whole.

For example, if KPI systems are required by a

client, then the KPIs as defined by the client willform the basis of the system. A clear

understanding of the objective is fundamental for

designing a successful KPI system.

5.2 Identify Stakeholders

Any introduction of such a system may cause

concern. This is best counteracted with a short

discussion between the various stakeholders,

with specific reference to project managers. Thekey is to identify the reasons for the KPI

exercise, establish the requirements from each

individual and look to address concerns before

the system is in place and look towards how

these can be alleviated. For a KPI system to

work it requires the support of those who will

provide the information. Once stakeholders have

been identified and consulted, it may be useful to

reconsider the requirements taking into

consideration the wider needs of the group.

5.3 Identify Nominated Person

One of the main problems of the KPI system is

that when they are put in place everyone thinks

that it is everyone elses responsibility. It is useful

to identify a single person who can collect and

collate data. They can help remind people when

data is required and ensure that the system is

stuck to. It also means that when data is required

everyone knows where to get it from. This person

can offer advice and support to people who are

actually collecting the KPI data.




15

5.4 Select Which KPIs will be

Required

Once the requirement and core purpose for the

KPI system has been put in place it will be

important to determine what to measure. There

are several issues that need to be addressed atthis stage:-

Limit the number of indicators to about 8-

12; more than this and the exercise

becomes onerous. The application of any

system will become very difficult if there are

too many measures and too much data to

collect.

Identify key measures. The measures must

be collected for a reason, if they are not

used or no action is taken if they are high orlow, then they are not key for the project or

organisation.

Consider what data you are already

collecting. Some of the headline KPIs, such

as safety, or productivity may already be

collected. It is important to check that you

are not collecting data that someone

already has.

The majority of systems will have a mixture ofexternal, such as the headline KPIs, and internal

benchmarks. An internal benchmark will allow

you to compare between your own projects, but

not at the national level.

5.5 Some Issues with Headline

KPIs

Below are some considerations concerning

Headline KPIs that may need taking into account

when selecting KPIs.

5.5.1 Construction Cost/

Time

The purpose of this KPI is to see how projects

are delivered cheaper and quicker on a year by

year basis. This is a useful measure, but is only

really useful when there are a number of directlycomparable projects where the units are identical

or very closely comparable. If there are a large

number of differences between the project and

the comparator project then the calculation will

be complex and the result may be inaccurate.

5.5.2 Client Satisfaction

Product

This score assesses how satisfied the client iswith the product. The scoring mechanism within

the guidelines from Construction Best Practice

Programme states that the data should be

collected scoring satisfaction from a scale of 1-

10. However, this does not actually identify why

the Client was happy with the product.

An alternative approach could be to adopt a

questionnaire that identifies several aspects of

product satisfaction. Some aspects of Design

Quality Indicators may provide some ideas as toaspects of design that may be considered in

such a questionnaire. It will be useful to talk to

the client in order to determine what drives their

satisfaction in terms of the delivery of the

product. Factors that may be important to some

clients may be less important to other clients. An

example may be found in Appendix D.

5.5.3 Client SatisfactionService

This score assesses how satisfied the client is

with the service as provided by the contractor or

consultant. Essentially, it serves as a measure of

the strength of the relationship. It is based

entirely on how the client perceives their needs

are being met. As with the Client Satisfaction

Product it may be useful to identify aspects of

performance, rather than using a single

measure. Issues that may be important to the

client may include: -

Response times to requests for information

Financial planning

Work planning

Site conditions

There may be a number of issues that are

important to a specific client. In addition, it should

be noted that service is an ongoing aspect of the

construction project. For longer projects, it may




6

be useful to collect client satisfaction data

periodically. This opens a line of communication

between project partners. If issues are raised

during the life of the project and addressed, then

problems of conflict may be avoided. An example

may be found in Appendix D.

5.5.4 Safety

There are two key points to remember in

addressing the safety score. The first is that the

score differs from the standard HSE measure in

that it is per 100,000 hours worked, rather than

per 10,000 hours. This is resolved by multiplying

the Accident Incidence Rate by 10 from the

standard score to get the KPI indicator value.

The second issue is that the Safety score is

organisational rather than for a project. While thescore can be collected for a project, it will mean

that a single accident will give a

very low score unless the project is

very large.

5.6 Other

Benchmarks

The Headline KPIs are the most

common, but there are a number

of other KPIs that may be used as

part of the project KPIs. It is quite

possible to mix and match from a

number of different sources. Information about

these may be found at KPIZone.

The majority of the Headline KPIs are lagging

indicators. This means that they will tell you what

performance is after the event. It may be useful

to use some leading indicators. These areindicators that give a clue as to future

performance. The best example of these is the

Respect for People indicators. Issues such as

staff turnover or absence, can often indicate

issues that have not yet translated into current

project performance, but may have an impact in

the future.

5.7 Internal Benchmarks

Internal benchmarks (see Section 2.2) are those

which have no external comparator data. An

individual company may decide that certain

measures are important to them. They will be

able to compare from project to project, but they

will not be able to compare externally.

Where a company has decided that a key issue

is not covered by the Headline indicators they

may want to use these internal benchmarks.

There are two main questions to be answered

when selecting internal benchmarks. The first: isthe measure important? There is little point

collecting a measure if it not important to the

company or other stakeholders. The second:

how can it be measured? It is vital to establish a

measurement process that is consistent and

easy to apply. This will support the comparison

between projects. Additionally, if an internal

benchmark requires a lot of work to collect and

analyse the data it may be difficult to collect. A

few examples of internal benchmarks are shown

in table 3 below: -

Table 3 Examples of Internal Benchmark

Internal benchmarks can become external

benchmarks if the company joins a

benchmarking club (see Section 5.12), where a

group of companies may share their scores

allowing for comparison outside of the company.

5.8 Data Management

When there are a number of projects the amount

of data may become large. While paper-based

systems are adequate, larger amounts of data

may be kept in an electronic form, such as a

spreadsheet or database. This will allow projects

to be more easily compared and allow the quick

generation of radar diagrams. The Centre forConstruction Innovation KPI Management Tool

(see fif. 5, opposite) can support this.

KPI Reason How Measured

Supply Chain Suppliers and subcontractor

Satisfaction relationships are important

for success of projects Questionnaire

Time to Final Settlement of Final Account is

Account important for the finances of Time from practical

the company completion

Value The value of engineering % of cost reduction

Engineering (VE) knowledge in raising associated with VE in

specification in relation to cost terms of final cost




17

Figure 5 CCI KPI Management Tool

5.9 Audit Systems

One of the key issues with KPI systems is the

issue of audit. Many companies do not audit their

KPI data which can raise questions with regards

to the accuracy of the data. It is an important

issue for those viewing and making decisionswith regards to KPI data. Third party audits of

KPI data provide an additional safeguard to the

figures presented and should be considered

when comparisons are made between different

KPI results.

An audit system should consider some of the

following issues: -

Documentary evidence to show where the

data has come from. Dates and signatures attached to

documents such as questionnaires.

Checked by an independent third party.

5.10 Use of KPIs

A KPI system must be used to drive

improvement. A system without outcomes

creates work without creating any benefit. It is

useful for any post-project review to consider theKPI scores, what they mean and if there is any

relevant action to be taken.

KPIs need to be used intelligently. Do not just

consider the score, but discuss why a particular

score is high or low.

If a score is low, ask why. There may be

good reasons for a score being low that

may have been beyond the project teams

control. By getting to the core reasondecisions can be taken to make sure that

any problems are mitigated. If low scores

are punished, then it is unlikely that

individuals will participate in the system.

If a score is high, ask why. There may be

something that the project team is doing

exceptionally well and it may be important

to capture it and replicate across other

projects.

5.11 System Review

The KPI system is not a rigid system. It must

meet the objectives of the stakeholders. If it is

not fulfilling the objectives then it may need

reviewing. In addition, if there are practical

issues of data collection or management, then

these must also be considered. A system that is

difficult to use or poorly understood, will not be

used.

5.12 Clients and KPIs

Clients may use KPIs to select potential partners.

However, it is important not only to take the

scores into consideration. Some key questions to

ask when looking at KPI submissions are,

What is the system used for? Does the

partner use KPIs to drive improvement? Do

they have a mechanism in place to look atthe scores and make changes to the way

work is being done?

Are the KPIs audited externally? An

external audit procedure will add additional

credence to any scores they are presenting.

A company that audits its own KPIs will

have a wide number of reasons to report in

a less rigorous manner.

KPI comparators are for all construction

projects. Certain projects may be from

sectors where performance is not as

traditionally high as others. There is an




8

issue that when comparing projects, you

may not be comparing like with like.

The benchmarks and scores can have a

degree of tolerance. This means that minor

differences between scores could represent

a fairly minimal difference in performance,

especially when factors that may have

influenced the scores are considered. KPIs

are a wet finger to give a rough indication

of performance and should not be

considered scientifically accurate.

5.13 Benchmarking Clubs

Benchmarking Clubs are a good way of

comparing yourself with similar companies. The

membership may be made up from more closely

comparable companies with benchmarks thathave been specifically developed. This allows for

better comparison, although they often require a

trusted third party to manage the data and

produce a report.

Support in setting up benchmarking clubs may

be obtained from the Centre for Construction

Innovation (www.ccinw.com), or the Construction

Best Practice Club (www.cbpp.org.uk).

5.14 Conclusions

As in the application of any management system,

it is vital that those people who are going to be

involved in the system have an understanding of

why the system is in place and what it is for.

Without this, the implementation will be difficult

as people will see it as additional work with no

clear reason. This can be countered by early

involvement and communication of results andwhat they mean. This level of involvement will

give the system meaning for all those involved. If

a project team has been collecting data and a

report is compiled it is important that the

outcomes are communicated and discussed with

them, rather than the data being used solely for

external communications.

KPIs are an excellent method of communication.

It enables different stakeholders within the

project to communicate about issues that areimportant to them. They have some basis on

which to start a dialogue, which is sometimes not

always easy within project teams. The collection

and reporting of KPIs is only one part of the

system, it is how they are used to communicate

and drive the change that creates value for those

involved.
http://www.cbpp.org.uk/http://www.cbpp.org.uk/




19

CCI KPI Page www.ccinw.com/kpi

Access to the KPI Management Tool and basicinformation about the application of KPIs and

there use.

KPIZone - http://

www.constructingexcellence.org.uk/

resourcecentre/kpizone/default.jsp

A comprehensive resource of data and

information with regards to the application and

use of KPIs. This includes issues such as

housing KPIs and Respect for People Indicators.

DQI-http://www.dqi.org.uk/

The Construction Industry Council Design Quality

Indicator website to support the development of

measures for design.

BREEAM -http://www.breeam.co.uk/

The Building Research Establishments

Environmental Assessment Model assesses theimpact of buildings in terms of their

environmental footprint addressing issues such

as energy and water use.

Consultants KPIs- http://www.acenet.co.uk

The Association of Consulting Engineers

publishes annual KPIs for consultants. For more

information visit their website.

Appendix A - Useful Websites
http://www.ccinw.com/kpihttp://www.constructingexcellence.org.uk/resourcecentre/kpizone/default.jsphttp://www.constructingexcellence.org.uk/resourcecentre/kpizone/default.jsphttp://www.constructingexcellence.org.uk/resourcecentre/kpizone/default.jsphttp://www.dqi.org.uk/http://www.breeam.co.uk/http://www.acenet.co.uk/http://www.acenet.co.uk/http://www.breeam.co.uk/http://www.dqi.org.uk/http://www.constructingexcellence.org.uk/resourcecentre/kpizone/default.jsphttp://www.constructingexcellence.org.uk/resourcecentre/kpizone/default.jsphttp://www.constructingexcellence.org.uk/resourcecentre/kpizone/default.jsphttp://www.ccinw.com/kpi




0

Benchmark a comparative measure that allows

companies to compare with the best in class.

Benchmarking the process of comparing

processes against Best Practice and therefore

driving improvement.

Best Practice a process or method of working

that currently achieves the best performance

among a group.

Demonstration Projects exemplar projects

demonstrating best practice. This information is

gathered by the Movement for Innovation. (http://www.m4i.org.uk/m4i/).

End users the ultimate users of a building

product.

Key Performance Indicator a measure that

shows the performance of a project or company

against critical criteria.

Lagging Indicator an indicator that tells us what

has already happened in terms of projectperformance, such as cost or time information.

Leading Indicator an indicator that may indicate

possible future performance. This measures

factors, such as staff turnover or absence that

may have an impact on future project

performance.

Appendix B - Glossary of Terms
http://www.m4i.org.uk/m4i/http://www.m4i.org.uk/m4i/http://www.m4i.org.uk/m4i/http://www.m4i.org.uk/m4i/




21

Appendix C - Abreviations

BREEAM Building Research Establishment

Environmental Assessment Method

CCI Centre for Construction Innovation

CABE Commission for Architecture and the

Built Environment

CBBP- Construction Best Practice Programme

DQI Design Quality Indicator

DTI Department of Trade and Industry

EPI Environmental Performance Indicators

HQI Housing Quality Indicators

KPI Key Performance Indicators


22/22

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CCI is the Centre for

Constructing Excellence

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promotes the Rethinking

Construction agenda to

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cci kpi report 2004

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